Woman wins right to enter PIA over mortgage debt

A mother of two has won an appeal over a financial institution’s objection to her entering a personal insolvency arrangement to pay off a €220,000 debt on a house she and her husband bought in 2007 for €300,000.

The woman, who has since informally separated from her husband, engaged the services of an unaccredited insolvency agency called Money Bloom which, she said, told her in 2014 that an agreement had been reached with the lending institution to restructure her debt.

This turned out not to be the case and the founder of Money Bloom was later convicted of fraud in relation to a separate matter, the High Court heard.

The woman found out that Pepper Finance bought her loan from AIB/EBS. Pepper ultimately passed resolution of her debt back to AIB/EBS, which brought proceedings seeking repossession of her home.

Ms Justice Marie Baker said the engagement of that firm unfortunately cost the woman more money in trying to deal with her arrears. It also involved a loss of time and effort in her attempts to rationally resolve her debt.

The judge overturned a Circuit Court order from November last refusing to allow the woman enter a personal insolvency arrangement (PIA). Such arrangements were introduced under new laws between 2012 and 2015 to help debtors avoid having to file for bankruptcy.

Ms Justice Baker said that, after the woman realised no restructuring arrangement had been made by Money Bloom, she resumed monthly payments of €700 on her mortgage, less than she was supposed to pay, but relatively substantial in the context of her earnings. She also made an application for a maintenance order against her husband in relation to their children, of €120 per fortnight.

Under the proposed PIA, the existing secured debt of €322,000 would be written off to €220,000. It would be split into two parts — a live mortgage balance of €140,000 and a “warehoused” loan of €80,000. Warehousing involves that part of the debt being addressed only if circumstances improve or it could be paid off at the end of the term by a person trading down or using, for example, pension funds to pay it off.

The term of the main mortgage was also to be extended to 27 years at variable interest rates under the PIA. Her monthly payments would be €684, which would increase after six years to €1,104 when the warehoused amount would be brought into account.

The woman argued the PIA would allow her retain her family home and give a better return for creditors than would be achieved through bankruptcy.

AIB/EBS argued there were insufficient grounds to show she could meet the terms of the PIA.

Overturning the Circuit Court’s refusal to allow her enter a PIA, Ms Justice Baker said the sale of the house at current value could achieve €160,000, which would mean AIB/EBS would get 50 cent in the euro if she was bankrupted. Under a PIA, it would be 68 cent.


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